Super industry urges Aussies to skip life's little luxuries

Australia's superannuation industry has launched a campaign urging people to spend less money on luxuries in order to put more money away for their retirement. But others warn that superannuation may not be as sound an investment as the industry claims.

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ELEANOR HALL: Australia's superannuation industry has launched a campaign urging people to put more money away for their retirement.

The Association of Superannuation Funds says people can boost their retirement income by more than $100,000 by cutting back on items like their daily cup of coffee.

But others warn that superannuation may not be as sound an investment as the industry claims.

Finance reporter, Sue Lannin.

SUE LANNIN: Superannuation funds in Australia hold more one trillion dollars under investment, but the average account balance for women at retirement age is just $112,000.

That's just a fraction of the more than $430,000 the Association of Superannuation Funds of Australia says a person needs to have a comfortable retirement with an income of around $40,000 a year.

Pauline Vamos is ASFA's chief executive.

PAULINE VAMOS: We live for so much longer, we have high expectations that we're going to be doing a lot of fantastic things in retirement and for most people, their dreams for when they stop work are not going to be a reality.

SUE LANNIN: ASFA has launched a campaign called Super Guru to encourage people to spend less on small luxuries like a cafe latte or a restaurant meal so they can save more for retirement.

Pauline Vamos again.

PAULINE VAMOS: The idea is to look at even whether you can save an extra $20 or $30 a week. We all know that when you're paying off a mortgage, one of the things that people are often advised is if you pay it off more regularly or even if you put another $20 towards your mortgage you will save a lot of money in interest.

Well it works the same with saving for retirement. If you just put a little bit more more regularly, even if it's an extra $10 to $20 a week, you are going to make a substantial difference.

SUE LANNIN: The problem is that people want to enjoy their life now rather than put money towards a retirement that may not happen - you don't know you're going to be here.

PAULINE VAMOS: The majority of people will be here. We all understand how hard it is to give up things today, but people have to start thinking about their whole life and they've got to think about if I 65, if I am 70 years old, and I can't go and have a coffee with friends, I can't go to my local club, I can't go out to a restaurant.

So we've got to start thinking the money I earn in my working life has to last my whole life - how am I going to do that?

SUE LANNIN: John Evans, is associate professor at the Australian School of Business at the University of New South Wales. He says Australians do need to save more for their retirement, but the issue is not so clear cut.

JOHN EVANS: If you want to have a high standard of living in retirement, either you're extremely wealthy now and you can put away a lot of money or if not then you're going to have to forego something now.

The question is, you know, is a cup of coffee a reasonable thing to forego.

SUE LANNIN: And with the share market so up and down, is this a good strategy?

JOHN EVANS: I would think a lot of people, particularly given that we now are in the world not of defined benefit superannuation but contribution accumulation superannuation, where the member bears the risk, would probably be regarded as not a good risk at all.

Because we've certainly seen a situation where people have had to defer their retirement because the markets have been down and the amount of money is just not adequate.

There is also an issue for people, particularly around the old age pension cut-off point, where if you accumulate a certain amount of assets, you actually start to reduce the amount of aged pension you can get.

So people in around that cut-off point really have to be very careful.